In 2016, the state-owned Ukrgasbank completely changed its growth path by choosing “green” financing as its strategic direction.
Since that time, the bank has become a leading expert in eco-friendly and energy-efficient projects. It has created a new market step-by-step welcoming new players. Kyrylo Shevchenko, Chairman of the bank board, speaks on how much effort it has taken to transform a traditional Ukrainian financial institution into the country’s leading Eco-Bank.
Ukrgasbank has become the first bank to introduce the Green Banking system, which is innovative for Ukraine. Were those changes difficult, and what challenges were faced?
Changes are always a rather difficult and time-consuming process. However, in our case, the result is worth the cost we paid during the process of forming the new “us”.
The bank faced a dilemma when we had to understand which markets to fight for. We could follow the well-trodden path in agricultural business lending which already had too many players; hence, the competition was tough. Thus, we decided to search for our own niche and made the right choice. We started from the Apartment Building Co-Owners Association lending, launched a respective product, and it “worked”. Although new lenders have entered that segment since then, we still have more than 2 thousand clients, and again, when we speak about the Apartment Building Co-Owners Association lending, people think of Ukrgasbank.
The “green” direction is a brand-new and innovative model in the banking sector. Furthermore, this direction is the most popular through the lens of both global and Ukrainian circumstances. Recently, Ukrainians have become most affected by the shortcomings of their extensive power industry – it is vital for us to switch from the traditional power system to the “green” one.
This is how we started promoting the idea that energy efficiency is an impactful way to minimize expenses, cut costs and, as a result, enhance competitiveness. To share this idea with our current and future clients, we have established a separate environmental and technical department. Their task is to offer a client not just financing but also a technical solution. Therefore, they come to a client, study their production and suggest recommendations for improvement.
To say the least, the results of the Bank’s “green” activity are impressive: our eco-portfolio consists of 440 projects amounting to UAH 21.6 billion! Therefore, gas savings amount to 793 million m3 a year, and CO2 emissions are reduced by more than 21.6 million tons. To make it clearer, the same thing would happen if we removed over half a million cars from the Ukrainian roads.
Kyrylo Shevchenko, How do green banks operate outside Ukraine?
The “Green” bank network operates all over the world. For instance, the US, where the first “green” bank, namely Connecticut Green Bank, was established back in 2011. In terms of the Green Banking functioning model, that financial institution is currently the most, so to speak, advanced one in the US by the scope of transactions.
Other well-known American banks operating under the Green Banking model are NY Green Bank (NYGB), the largest in the US, and the California Lending for Energy and Environmental Needs (CLEEN) Center operating as the state’s green bank within the California Infrastructure and Economic Development Bank. The main initiative of the latter is the Statewide Energy Efficiency Program (SWEEP), which finances energy efficiency and modernization projects for municipalities, universities, schools, and hospitals.
As regards Europe, one of the largest institutions operates in the United Kingdom. In 2012, the government established the UK British Investment Bank (GIB). The Bank works with various technologies such as energy efficiency, waste products, bioenergetics, onshore wind, and marine renewable sources.
What direction is the most popular?
No doubt, it is renewable energy. Unfortunately, Ukraine is one of the countries with the highest energy consumption in the world. In addition, significant damage to the Ukrainian environment is caused by old enterprises inherited from the Soviet period. This is why the promotion of “green” loans is not just our mission; we want to send a message – alternative power has no alternatives in the modern world!
Since 2016, we have gained the support of the International Finance Corporation (IFC). Together, we have already implemented 157 large-scale renewable power projects.
Lending for the construction of the Solar Chornobyl solar power plant in Prypiat is probably the most significant one in our portfolio. It generates clean electricity under the “green” rate, which results in the reduction of CO2 emissions by 467 tons a year.
We have recently implemented another unique for Ukraine and the entire Europe project – a solar power plant in Vilnohirsk, the Dnipropetrovsk Region.
This new-generation solar power plant (SPP) will use a groundbreaking technology of double-phase solar panels in combination with a modern solar tracking system. This new technology allows generating 40% more electricity in comparison with traditional solar stations of the same size. Moreover, this plant is the most efficient in Ukrainian climes. Even in winter, it will not reduce the generation of electricity by transforming the rays reflected from the snow into pure solar power, while traditional SPPs reduce their generation to almost zero. The Vilnohirsk solar power plant is a unique project for the solar power sector in general.
In Ukraine, this type of SPP is the first one where an innovative technology has transformed from a business idea into a real active facility. Hence, we, as No. 1 ECO-Bank in Ukraine, are specifically proud that our dream to apply cutting-edge green solar power technologies has become true in Ukraine and has been financed by the ECO-Bank. This project is vital in terms of its social significance, considering that the industrial region has a major anthropogenic pressure. Implementation of such eco-projects is a positive signal for the region residents – environmental issues can be efficiently resolved, and each resident can benefit from it.
According to UKRGASBANK’s calculations, the amount of such “green” electricity will be sufficient to meet the demand of over 23 thousand households, and, as the result of project implementation, CO2 emissions will be reduced by approximately 2.5 thousand tons a year.
It is the 114th solar power plant in Ukraine to have been constructed and placed in operation in cooperation with UKRGASBANK. The total capacity of the plants financed by the ECO-Bank is 750 MW. Their operation makes it possible to reduce CO2 emissions by 414 thousand tons.
In your opinion, why should business go eco-friendly?
It is a global trend, which has been “critical” rather than just “fashionable” for a long time already. Business is finally taking the responsibility, since we all see the consequences of our activity at the global level. While chasing more comfortable living for humans, we are gradually making our planet unfit for any living thing.
That is why our activity, which seems absolutely harmless and aims at making our lives easier, adversely impacts our health and quality of life. Against logic, our health depends on our efforts to make life better. The price of such a better life dream can be deadly. Do we have a way out, considering that it is already impossible to stop technological progress? I think, we do. The more we strive to make life better, the more efforts we must make to help our planet cope with the results of our activity. We must find a balance between “better” for us and “better” for the environment.
Ukrainian business is well aware that saving brings benefits. It means that modern energy-efficient solutions implemented into business enable significant savings. Surely, Ukrgasbank offers special conditions, such as lower loan rates and higher deposit rates, for those who chose an eco-friendly and responsible approach to doing business. This is how we encourage going eco-friendly and responsible.
Is the “alternative” popular among Ukrainians?
It was a surprise for us that the “green” direction immediately became popular among clients. Thus, we were the first bank in Ukraine to introduce a credit program for ready-to-operate solar stations installation in people’s backyards. Currently, over 6 thousand Ukrainian families have installed private SPPs.
However, what brings a special joy is the reason why an ever-growing number of Ukrainians switches to “green” energy; it is not just their aspiration to become energy-independent. Now, our clients understand the value of their investment in the country’s healthy future.
Does the state support “green” initiatives?
Of course. Perhaps, the most popular form of support is a state energy efficiency program adopted to compensate from 20% to 70% of the loan to an individual or an Apartment Building Co-Owners Association. The fact that the program is in demand proves that the energy-saving issue is topical now at the highest state and family levels.
Without any doubt, we are proud that we are the ones people choose to implement the most large-scale energy-efficient projects in Ukraine. Partly, because we already have relevant successful experience, namely full energy modernization of residential buildings in Kyiv for UAH 10 million and in Lutsk for UAH 3.5 million. Just recently, we have become the only partner of the Energodim compensation program of the IFC Energy Efficiency Fund. Yet, Ukrgasbank is the only front office, a “window” so to say, through which Apartment Building Co-Owners Associations can receive grants for implementing comprehensive modernization of residential buildings. In Ukraine, there are 200 thousand of multi-storey buildings and 33 thousand buildings integrated into Apartment Building Co-Owners Associations, which means that we have enormous potential in housing sector energy modernization.
Does business still apply for traditional loans?
Of course. But our managers can analyze a business and offer an interesting cooperation option since it is often difficult for our clients to understand what program they need. They simply do not know all the opportunities of obtaining a certain type of bank financing. Yet, we have many options. We have developed a portfolio for small and medium enterprises that offers financing at interest rates that are lower than the market’s ones.
To that end, we have launched a new unique “ECO BOOM” program, which helps gain insights into what a business needs and develop a tailored development plan. Therefore, we offer our clients access to new modern bank products, programs, and financial solutions, which will take their business to a new level of quality.
According to your forecasts: when will eco-initiatives become a common thing for Ukrainians?
Eco-trends are just emerging in Ukraine, but we are already defending them. I am referring to the third direction of our activity – environmental protection project financing. Statistics show how important this initiative is right now. Thus, Ukraine is ranked one of the 10 countries with the highest volume of waste products per capita, which is over 10.6 tons. We are being flooded by waste, 96% of which is removed to landfills where it continues to “live” in the ground for years.
Our contribution to fighting this issue is financing the purchase of modern equipment for operating biogas-powered plants on solid waste landfills in several regions of Ukraine.
At the same time, we are sure that it is impossible to bring harmony into the world unless you have it at home. I mean supporting eco-trends in our offices. Waste sorting and battery recycling containers, energy-saving lighting, “no” to paper documentation, and introduction of electronic signature – we are steadily working on creating a truly eco-responsible office efficient in using resources.
Our small victory is abandoning plastic when working with clients. It would seem such a little thing, yet, we have calculated that annually our bank used 420 thousand of such plastic page protectors. In comparison, it is equivalent to the area of 3,060 km2, which is 428 football fields!
When developing eco-culture, we do things in a big way – we think over each detail. Our strategy of developing a brand-new, clean, and safe model has proven its value, and the uncompromising following the “green” direction has let us finally realize our potential.